Understanding Business Cycles and Macroeconomic Data

A collection of vocabulary flashcards related to macroeconomic trends and cycles, focusing on understanding concepts associated with the business cycle and key economic indicators.

Macroeconomic Trends

The long-term patterns and changes in the economy, influencing overall economic performance.

Business Cycle

Short-term fluctuations in economic activity that cause actual output to deviate from potential output.

Output Gap

The difference between actual output and potential output, expressed as a percentage of potential output.

Peak

A high point in economic activity within the business cycle.

Trough

A low point in economic activity within the business cycle.

Recession

A period of declining economic activity, measured from peak to trough.

Expansion

A period of increasing economic activity, generally running from trough to peak.

Leading Indicators

Variables that tend to predict future economic activity and often change before the economy starts to follow a particular trend.

Lagging Indicators

Variables that follow economic trends with a delay and confirm patterns occurring in the business cycle.

Okun's Rule of Thumb

For every percentage point of actual output below potential output, the unemployment rate rises by about half a percentage point.

Potential Output

The maximum level of output an economy can sustain where all resources are fully employed.

Negative Output Gap

Occurs when the economy produces less than its potential, indicating underutilization of resources.

Positive Output Gap

Occurs when the economy produces more than its potential, often leading to inflation.

Comovement

The correlation in movement between different economic indicators, indicating that if one part of the economy is doing well, others likely are too.

Revisions

Updates to earlier economic data that occur when initial estimates are based on incomplete information.

Seasonal Adjustment

Data adjustment aiming to remove predictable seasonal patterns to reveal underlying trends.

Nominal Variables

Economic measurements expressed in current dollar values without adjusting for inflation.

Real Variables

Economic measurements adjusted for inflation, allowing for comparison of quantities at constant prices.

Economic Indicators

Statistics that provide insights into the economic performance, such as GDP and unemployment rates.